Transporting Imported Goods To One’s Own Factory Premises Is Non-Taxable Supply & “Exempted Goods” Under MGST Act: Bombay HC
The Bombay High Court has observed that transporting goods imported to own factory premises is a non-taxable supply and will fall within the category of “exempted goods” under the Maharashtra Goods and Services Tax Act, 2017 (“MGST Act”).
The Division Bench of Justice KR Shriram and Justice Jitendra Jain observed, “In our view, when a person transports the goods imported, after Customs clearance to his own factory premises then it is a non-taxable supply and would fall within the category of “exempted goods” since no tax as opined earlier is leviable under the Act. In such a scenario, the penalty under the second limb of Section 129 (1) (a) would be levied which is two per cent of value of goods or 25,000/- whichever is less."
Advocate Ishaan Patkar appeared for the Petitioner whereas Addl. GP SD Vyas and Advocate Anjani Kumar Singh appeared for the Respondents.
Three petitions were filed under Article 226 of the Constitution whereby the Petitioner challenged an order and a corrigendum passed by the State GST Authority under Section 129(1) of the MGST Act levying penalty concerning three consignments not being accompanied by e-way bill.
The Petitioner imported certain machinery from China that were fully exempted under the Customs Act and Integrated Goods and Services Tax Act, 2017 (“IGST Act”) since the EPCG scheme covered them. Petitioner, thereafter, arranged a transporter to transport the said machinery from the port to its factory at Surat.
The vehicle where the machinery was being transported from the port to Surat was intercepted at Palghar in Maharashtra. On the interception, it was found that the e-way bill did not accompany the vehicle in which the machinery was transported as mandated by Rule 138 A of the MGST Rules, 2017. However, the Bill of Entry accompanying the vehicle contained all the details.
The main issue was the Petitioner was liable for penalty under Section 129(1) of the MGST Act. The Court perused Section 2, 9, 7, 129 of the Act and said, “Therefore, in our view, the activity of transport of machinery from JNPT to petitioner’s own factory would not fall within Section 7 which deals with scope of supply and consequently in the absence of any supply, and absence of consideration the charging Section 9 also would not get attracted so as to make petitioner liable to pay any tax.”
The Court held that if the interpretation sought by the State GST Authority is accepted then the second limb of Section 129(1)(a) would become redundant which deals with a penalty in case of exempted goods and therefore such an interpretation is to be rejected and also second limb is a special provision dealing with exempted goods and therefore in the case of petitioner second limb of Section 129(1) (a) should be made applicable.
Accordingly, the Court disposed of the writs and ordered that the Petitioner is not liable to pay the GST on movement from Jawaharlal Nehru Port Authority (“JNPT”) to its factory, therefore, modified the order by holding that the Petitioner is only liable for a penalty of Rs. 25,000/- only under Section 129(1) of the Act.
Cause Title: Fabricship Pvt. Ltd. v. Union of India and Ors. (Neutral Citation: 2024:BHC-AS:25019-DB)
Appearances:
Petitioner: Advocate Ishaan Patkar
Respondents: Addl. GP SD Vyas, AGP MM Pable and Advocate Anjani Kumar Singh and DP Singh.